Centrica takes £240m hit as it shelves gas storage projects

British Gas owner Centrica today blamed the Government for not subsidising new gas storage facilities as it dealt a blow to Britain’s energy security plans by abandoning two key projects.

Shares in the company tumbled as it took a £240 million writedown on the decision to shelve the gas storage plans in East Yorkshire and the North Sea.

A prolonged cold spell in March exposed the vulnerability of the country’s storage system — the UK has only enough to house about 15 days’ supply and reserves ran down to just a few hours earlier this year. By contrast, Germany has 99 days worth of storage and France 122 days.

Centrica, which also blamed its decision on “weak economics” generally, announced it would not proceed with its £1.5bn conversion of the depleted Baird gas field in the southern North Sea off the Norfolk coast. This would have held enough gas to meet 13.5 days of peak demand, doubling UK storage capacity and creating 1,000 construction jobs.

Centrica has also shelved a smaller project to convert a depleted gas field at Caythorpe in Yorkshire.

Shares fell 5.10p to 397.10p as a Centrica spokesman said: “The decision was taken in light of weak economics for storage projects and the announcement by the UK Government on September 4 ruling out intervention in the market to encourage additional gas storage capacity to be built. We believe there’s still a need for new gas storage capacity in the UK but unfortunately market conditions now do not make that investment possible.”

The Government says not subsidising gas will save consumers £750 million over a decade and claims supplies are “resilient”.